CUSTODIAN AGREEMENT
dated as of [●], 2022
between
QUORUM RECEIVABLES FUNDING 2022-1 LLC
a Delaware limited liability company
as Owner
and
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION
a national banking association
as Custodian
EXECUTION DRAFT
October 12, 2022
CONFIDENTIAL TREATMENT REQUESTED — This document and the information contained herein are confidential and proprietary. This document is being provided solely for the use of the parties hereto and their respective legal and financial advisors in connection with the transaction described herein. Any unauthorized use, disclosure, distribution, or copying of this document, in whole or in part, is strictly prohibited. Receipt of this document does not convey any rights to reproduce, disclose, or distribute its contents, or to manufacture, use, or sell anything that it may describe.
Prepared by:
Calderwood & Harkness LLP 601 Lexington Avenue New York, New York 10022
Attention: Douglas Carmichael, Partner
Matter No. 1025-00007
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT (this "Agreement") is dated as of [●], 2022, and is entered into by and between:
QUORUM RECEIVABLES FUNDING 2022-1 LLC, a Delaware limited liability company (the "Owner" or "Issuer"), having its principal place of business c/o Quorum Insurance Holdings Corp., 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901;
and
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association (the "Custodian" or "Calvoneth Trust"), acting in its capacity as custodian hereunder, having its Corporate Trust Office at 600 Travis Street, Suite 5800, Houston, Texas 77002.
RECITALS
WHEREAS, Quorum Receivables Funding 2022-1 LLC (the "Owner" or "Issuer"), a Delaware limited liability company duly organized and existing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894231), has been formed as a bankruptcy-remote special purpose entity for the purpose of acquiring and holding insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a Delaware limited liability company, and issuing notes backed by such receivables;
WHEREAS, the Owner is issuing $375,000,000 aggregate principal amount of Class A Notes (preliminary CUSIP: 74892TAA3), $75,000,000 aggregate principal amount of Class B Notes (preliminary CUSIP: 74892TAB1), and $35,000,000 aggregate principal amount of Class C Notes (preliminary CUSIP: 74892TAC9) (collectively, the "Notes"), representing an aggregate principal amount of $485,000,000, pursuant to that certain Indenture dated as of [●], 2022 (the "Indenture") between the Owner and Calvoneth Trust Company, National Association ("Calvoneth Trust" or "Custodian"), acting in its capacity as indenture trustee (in such capacity, the "Trustee");
WHEREAS, QPF, acting in its capacity as servicer (the "Servicer"), services the receivables pool pursuant to that certain Servicing Agreement dated as of [●], 2022 (the "Servicing Agreement") among the Owner, QPF, and Calvoneth Trust as Trustee, and Northvane Bank, National Association ("Northvane Bank" or "Northvane"), has been appointed as back-up servicer under the Back-Up Servicing Agreement dated as of [●], 2022;
WHEREAS, the receivables comprising the initial pool were transferred from QPF to Quorum Receivables Holding LLC ("QRH"), a Delaware limited liability company (Delaware Secretary of State File No. 7894228), acting in its capacity as depositor and intermediate special purpose entity, pursuant to that certain Receivables Sale Agreement dated as of [●], 2022 (the "Receivables Sale Agreement") between QPF (as Seller) and QRH (as Purchaser), and from QRH to the Owner pursuant to that certain Receivables Transfer Agreement dated as of [●], 2022 (the "Receivables Transfer Agreement") between QRH (as Transferor) and the Owner (as Transferee);
WHEREAS, the Owner desires to appoint Calvoneth Trust as custodian of the Receivable Files (as defined herein) relating to the receivables held by the Owner, and Calvoneth Trust is willing to accept such appointment, on the terms and conditions set forth herein;
WHEREAS, Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation (NYSE: QIHC), headquartered at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901, is the ultimate parent entity and sponsor of the transaction contemplated by the Related Documents; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Account Control Agreement" means the Account Control Agreement dated as of [●], 2022, among the Owner, Calvoneth Trust Company, National Association, in its capacity as securities intermediary, and Calvoneth Trust Company, National Association, in its capacity as Trustee, as the same may be amended, supplemented, or otherwise modified from time to time.
"Administration Agreement" means the Administration Agreement dated as of [●], 2022, among the Owner, QPF, and Calvoneth Trust as Trustee, pursuant to which QPF provides certain administrative services with respect to the Owner.
"Back-Up Servicer" means Northvane Bank, National Association, in its capacity as back-up servicer under the Back-Up Servicing Agreement, or any successor back-up servicer appointed thereunder.
"Back-Up Servicing Agreement" means the Back-Up Servicing Agreement dated as of [●], 2022, among the Owner, QPF as Servicer, Northvane Bank, National Association, as Back-Up Servicer, and Calvoneth Trust as Trustee.
"Business Day" means any day other than a Saturday, Sunday, or any other day on which banking institutions in New York, New York or Houston, Texas are authorized or obligated by law, regulation, or executive order to remain closed.
"Class A Notes" means the $375,000,000 aggregate principal amount of Class A Notes issued by the Owner pursuant to the Indenture (preliminary CUSIP: 74892TAA3).
"Class B Notes" means the $75,000,000 aggregate principal amount of Class B Notes issued by the Owner pursuant to the Indenture (preliminary CUSIP: 74892TAB1).
"Class C Notes" means the $35,000,000 aggregate principal amount of Class C Notes issued by the Owner pursuant to the Indenture (preliminary CUSIP: 74892TAC9).
"Closing Date" means the date on which the Notes are first issued under the Indenture.
"Collection Period" means each monthly period as defined in Section 1.01 of the Indenture, commencing on the first day of each calendar month and ending on the last day of such calendar month, or, in the case of the initial Collection Period, commencing on the Closing Date and ending on the last day of the calendar month in which the Closing Date occurs.
"Corporate Trust Office" means, with respect to the Custodian (and with respect to Calvoneth Trust in its capacity as Trustee), the office of Calvoneth Trust Company, National Association located at 600 Travis Street, Suite 5800, Houston, Texas 77002, or such other office as the Custodian may designate from time to time in accordance with this Agreement.
"Brindoval" or "Brindoval Ratings" means Brindoval Ratings Inc., located at 55 Water Street, New York, New York 10041, or any successor entity thereto.
"Custodian" means Calvoneth Trust Company, National Association, a national banking association, acting in its capacity as custodian under this Agreement, with its Corporate Trust Office at 600 Travis Street, Suite 5800, Houston, Texas 77002, or any successor custodian appointed in accordance with Article VIII hereof.
"Custodian Certification" means the certification to be delivered by the Custodian in substantially the form attached hereto as Exhibit A.
"Custodian Fee" means the fee payable to the Custodian in consideration of its services hereunder, as set forth in Section 6.01 and in the Fee Schedule attached hereto as Exhibit C.
"Cut-Off Date" means June 30, 2022.
"Eligible Receivable" means each Receivable that satisfies all of the eligibility criteria set forth in the Receivables Sale Agreement, including, without limitation, each of the following criteria: (i) such Receivable was originated by QPF in the ordinary course of its business as an insurance premium finance company; (ii) such Receivable is denominated and payable in lawful currency of the United States of America; (iii) such Receivable is secured by unearned premium refund rights held by the related obligor under one or more insurance policies; (iv) the original term of such Receivable does not exceed twelve (12) months; (v) the obligor with respect to such Receivable is a commercial policyholder organized or resident in the United States; (vi) such Receivable is not in default (no payment with respect thereto is more than sixty (60) days past due as of the applicable date of determination); and (vii) the origination and servicing of such Receivable has been conducted in compliance with all applicable federal, state, and local laws and regulations, including, without limitation, all applicable usury and licensing laws.
"Event of Default" has the meaning assigned to such term in the Indenture.
"Fee Schedule" means the fee schedule attached hereto as Exhibit C, as the same may be amended from time to time by mutual agreement of the Owner and the Custodian, subject to the provisions of Section 10.05.
"Fortbridge" means Fortbridge Corporate Services LLC, a Delaware limited liability company, with its principal office at 1209 Orange Street, Wilmington, Delaware 19801, the provider of the independent manager of the Owner.
"Grant of Security Interest" means the Grant of Security Interest (Pledge Agreement) dated as of [●], 2022, from the Owner to Calvoneth Trust Company, National Association, in its capacity as Trustee, as the same may be amended, supplemented, or otherwise modified from time to time.
"Indenture" means the Indenture dated as of [●], 2022, between the Owner and Calvoneth Trust Company, National Association, as Trustee, as the same may be amended, supplemented, or otherwise modified from time to time.
"Independent Manager" means Timothy R. Callan, an individual provided by Fortbridge Corporate Services LLC, serving as the independent manager of the Owner pursuant to the Owner's limited liability company agreement.
"Initial Pool Balance" means $612,000,000, which is the aggregate outstanding principal balance of the Receivables in the initial pool as of the Cut-Off Date.
"Liquidity Facility Agreement" means the Liquidity Facility Agreement dated as of [●], 2022, between the Owner and Northvane Bank, National Association, as liquidity facility provider.
"Northvane" or "Northvane Bank" means Northvane Bank, National Association, in its capacities as back-up servicer and liquidity facility provider under the Back-Up Servicing Agreement and the Liquidity Facility Agreement, respectively.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of [●], 2022, among the Owner, QPF, QRH, QIH, and the initial purchasers of the Notes.
"Noteholder" means any holder of a Note, as reflected in the register maintained by the Trustee or the note registrar under the Indenture.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes.
"Obligor" means, with respect to any Receivable, the person or entity obligated to make payments thereunder.
"Owner" means Quorum Receivables Funding 2022-1 LLC, a Delaware limited liability company (Delaware Secretary of State File No. 7894231).
"Performance Guaranty" means the Performance Guaranty dated as of [●], 2022, delivered by QIH in favor of the Trustee for the benefit of the Noteholders, guaranteeing certain obligations of QPF and QRH under the Related Documents.
"Pinnacle" or "Pinnacle Rating Services" means Pinnacle Rating Services LLC, located at 7 World Trade Center, New York, New York 10007, or any successor entity thereto.
"QPF" means Quorum Premium Finance LLC, a Delaware limited liability company, in its capacities as originator, seller, and servicer under the Related Documents.
"QIH" means Quorum Insurance Holdings Corp., a Delaware corporation (NYSE: QIHC), headquartered at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901, the ultimate parent entity and sponsor of the transaction.
"QRH" means Quorum Receivables Holding LLC, a Delaware limited liability company (Delaware Secretary of State File No. 7894228), in its capacities as depositor, intermediate special purpose entity, and sole member of the Owner.
"Rating Agencies" means, collectively, Brindoval Ratings Inc. and Pinnacle Rating Services LLC.
"Receivable" means each insurance premium finance loan originated by QPF and transferred to the Owner through the chain of transfer described in the Recitals, including any loan added to the pool during the Revolving Period in accordance with the Receivables Sale Agreement and the Receivables Transfer Agreement.
"Receivable File" means, with respect to each Receivable, the documents described in Section 2.02 hereof.
"Receivables Sale Agreement" means the Receivables Sale Agreement dated as of [●], 2022, between QPF (as Seller) and QRH (as Purchaser), as the same may be amended, supplemented, or otherwise modified from time to time.
"Receivables Schedule" means the schedule delivered by the Servicer identifying each Receivable in the pool, in the form described in Schedule I hereto, as updated from time to time during the Revolving Period.
"Receivables Transfer Agreement" means the Receivables Transfer Agreement dated as of [●], 2022, between QRH (as Transferor) and the Owner (as Transferee), as the same may be amended, supplemented, or otherwise modified from time to time.
"Related Documents" means, collectively, the Indenture, the Servicing Agreement, the Receivables Sale Agreement, the Receivables Transfer Agreement, the Note Purchase Agreement, the Administration Agreement, the Back-Up Servicing Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Grant of Security Interest, the Performance Guaranty, and any other agreement or instrument executed and delivered in connection with the issuance of the Notes.
"Revolving Period" means the twenty-four (24) month period commencing on the Closing Date during which new Eligible Receivables may be added to the pool of Receivables in accordance with the terms and conditions of the Receivables Sale Agreement and the Receivables Transfer Agreement and subject to the limitations set forth in the Indenture.
"Servicer" means QPF, in its capacity as servicer under the Servicing Agreement, or any successor servicer appointed pursuant to the Servicing Agreement (including, without limitation, Northvane Bank, National Association, in its capacity as back-up servicer).
"Servicing Agreement" means the Servicing Agreement dated as of [●], 2022, among the Owner, QPF as Servicer, and Calvoneth Trust Company, National Association, as Trustee, as the same may be amended, supplemented, or otherwise modified from time to time.
"Trust Officer" means Gerald K. Fontaine, Senior Trust Officer of Calvoneth Trust Company, National Association, or any successor officer or employee of the Custodian designated in writing by the Custodian to act in such capacity.
"Trust Receipt" means a receipt in substantially the form attached hereto as Exhibit B, to be executed by the Servicer or its designee upon temporary release of any Receivable File from the Custodian's possession for servicing purposes.
"UCC" means the Uniform Commercial Code as in effect in the applicable jurisdiction.
Additional defined terms used herein but not otherwise defined in this Section 1.01 shall have the respective meanings assigned to such terms in the Indenture.
Section 1.02 — Rules of Interpretation
Unless the context of this Agreement otherwise requires:
(a) References herein to "Articles," "Sections," "Exhibits," and "Schedules" are references to the Articles, Sections, Exhibits, and Schedules of this Agreement unless otherwise specified.
(b) Words importing the singular include the plural and vice versa, and words importing any gender include all genders.
(c) The headings and captions of the Articles, Sections, and other subdivisions of this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.
(d) The word "including" (and its grammatical variations) as used herein shall mean "including, without limitation" and shall not be construed to limit any general statement that precedes it to the specific or similar items that follow it.
(e) References to any law, statute, regulation, or rule shall include any amendment, modification, or successor thereto.
(f) References to any agreement or instrument shall mean such agreement or instrument as it may be amended, supplemented, restated, or otherwise modified from time to time in accordance with the terms thereof.
(g) If any date on which any action is required to be taken hereunder is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.
(h) All references to time of day shall be to New York City time unless otherwise specified.
(i) References to "the parties" shall mean the Owner and the Custodian, unless the context otherwise requires.
Section 1.03 — Incorporation by Reference
Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Indenture. In the event of any conflict or inconsistency between the definitions set forth in this Agreement and the definitions set forth in the Indenture, the definitions set forth in this Agreement shall control for purposes of this Agreement.
ARTICLE II — APPOINTMENT OF CUSTODIAN; DELIVERY OF RECEIVABLE FILES
Section 2.01 — Appointment
(a) The Owner hereby appoints Calvoneth Trust Company, National Association as Custodian of the Receivable Files relating to the Receivables held by the Owner, and Calvoneth Trust hereby accepts such appointment and agrees to act as Custodian, subject to and in accordance with the terms and conditions of this Agreement.
(b) The Custodian shall hold the Receivable Files at its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, Texas 77002, or at such other location as may be approved in advance in writing by the Owner and the Trustee. The Custodian shall notify the Rating Agencies (Brindoval Ratings Inc. and Pinnacle Rating Services LLC) promptly upon any change in the location at which Receivable Files are held, and shall obtain rating agency confirmation that such change would not result in a downgrade or withdrawal of the ratings assigned to any class of Notes prior to effecting such change, if applicable.
(c) The Custodian acknowledges and agrees that it acts as bailee of the Receivable Files for the benefit of the Owner and, pursuant to the Grant of Security Interest, the Trustee on behalf of the Noteholders. The Custodian's possession of the Receivable Files is for the purpose of perfecting the security interest of the Trustee in the Receivable Files and the Receivables to which they relate, and the Custodian shall not claim any right, title, or interest in or to the Receivable Files or the Receivables, except for its right to compensation and reimbursement as set forth in Article VI hereof.
(d) The Custodian acknowledges that the Receivable Files and the Receivables to which they relate are subject to the lien and security interest of the Trustee under the Indenture and the Grant of Security Interest, and the Custodian shall comply with any and all written instructions of the Trustee with respect to the Receivable Files in accordance with the terms of this Agreement.
Section 2.02 — Receivable Files
For each Receivable included in the pool (whether as part of the initial pool as of the Cut-Off Date or added during the Revolving Period), the "Receivable File" shall consist of the following documents:
(a) The original or a true and correct copy of the executed premium finance agreement (i.e., the loan agreement between the Obligor and QPF), together with any schedules, annexes, or addenda thereto;
(b) The original or a true and correct copy of the power of attorney, authorization to cancel the insurance policy, or other instrument pursuant to which the Obligor authorized QPF or its assigns to cancel the related insurance policy and receive the unearned premium refund, if applicable;
(c) A copy of the notice of premium financing delivered to the insurance carrier or its agent with respect to the related insurance policy, if applicable;
(d) Evidence of the assignment of the unearned premium refund rights from the Obligor to QPF (or its assigns), including any collateral assignment or security agreement;
(e) A copy of any UCC financing statement (including any continuation statements or amendments thereto) filed in connection with the Receivable, if applicable;
(f) The original or a true and correct copy of any endorsement, amendment, modification, or supplement to the premium finance agreement;
(g) The payment history and account statement for the Receivable, which may be maintained in electronic form on the Servicer's electronic document management system; and
(h) Such other documents as may be reasonably required by the Owner, the Servicer, or the Trustee from time to time in connection with the servicing, administration, or enforcement of the Receivable.
The parties hereto acknowledge and agree that certain documents constituting Receivable Files may be maintained in electronic form on the Servicer's electronic document management system or on such other electronic systems as may be maintained by the Custodian. To the extent any Receivable File is maintained in electronic form, the Custodian shall maintain reasonable data security procedures, including, without limitation, appropriate access controls, encryption standards, and backup and disaster recovery procedures, in each case consistent with the Custodian's standard practices for its institutional custodial clients and in compliance with applicable law and regulation.
Section 2.03 — Initial Delivery
(a) On or prior to the Closing Date, QPF (in its capacity as the initial Servicer) shall deliver, or cause to be delivered, to the Custodian at its Corporate Trust Office, the Receivable Files for all Receivables in the initial pool. The initial pool consists of approximately 82,400 insurance premium finance loans with an aggregate outstanding principal balance of $612,000,000 as of the Cut-Off Date of June 30, 2022.
(b) Delivery of the Receivable Files may be effected by (i) physical delivery of original documents (or true and correct copies thereof, to the extent originals are not available) to the Custodian's Corporate Trust Office by secured courier or other means reasonably acceptable to the Custodian, and/or (ii) granting the Custodian access to the Servicer's electronic document management system for such Receivable Files as are maintained in electronic form, together with such login credentials, access codes, and technical documentation as the Custodian may reasonably require.
(c) Simultaneously with the delivery of the Receivable Files, the Servicer shall deliver to the Custodian the initial Receivables Schedule in the form described in Schedule I hereto, identifying each Receivable in the initial pool and containing the information specified therein.
(d) The Custodian shall acknowledge receipt of the Receivable Files and the initial Receivables Schedule by delivering to the Owner, the Servicer, and the Trustee a written acknowledgment of receipt within five (5) Business Days of the Closing Date.
Section 2.04 — Additions During Revolving Period
(a) During the Revolving Period (the twenty-four (24) month period commencing on the Closing Date), when additional Eligible Receivables are added to the pool pursuant to the Receivables Sale Agreement and the Receivables Transfer Agreement, the Servicer shall deliver the related Receivable Files to the Custodian within five (5) Business Days of the date on which such additional Receivables are transferred to the Owner.
(b) Each delivery of additional Receivable Files shall be accompanied by an updated Receivables Schedule or a supplement thereto identifying each additional Receivable, including the information specified in Schedule I hereto.
(c) The Custodian shall confirm receipt of each delivery of additional Receivable Files by delivering to the Owner, the Servicer, and the Trustee a written acknowledgment of receipt within five (5) Business Days following the Custodian's receipt thereof.
(d) The Custodian shall maintain a current and updated schedule of all Receivable Files in its possession, reflecting both the initial Receivable Files and all additions made during the Revolving Period, as well as any Receivable Files released in connection with Receivable payoff, liquidation, or servicing activities.
Section 2.05 — Document Deficiencies
(a) If the Custodian identifies a deficiency in any Receivable File upon initial delivery, upon addition during the Revolving Period, or at any time during the Custodian's periodic review of the Receivable Files, the Custodian shall provide written notice of such deficiency (a "Deficiency Notice") to the Owner and the Servicer within ten (10) Business Days following discovery of such deficiency, with a copy of such Deficiency Notice to the Trustee. Each Deficiency Notice shall (i) identify the affected Receivable by loan number and Obligor name, (ii) describe the nature of the deficiency in reasonable detail, and (iii) specify the document(s) that are missing, incomplete, or otherwise deficient.
(b) Upon receipt of a Deficiency Notice, the Servicer shall use commercially reasonable efforts to cure any such deficiency within thirty (30) days of receipt of the Deficiency Notice by delivering the missing or corrected document(s) to the Custodian. The Servicer shall notify the Custodian, the Owner, and the Trustee in writing upon the cure of any deficiency.
(c) If any deficiency is not cured within the thirty (30) day cure period, the Owner (or the Trustee at the direction of Noteholders holding Notes of a majority in aggregate principal amount outstanding) may require QPF to repurchase or replace the affected Receivable in accordance with the repurchase and substitution provisions of the Receivables Sale Agreement. Any such repurchase or substitution shall be effected within the time periods and on the terms specified in the Receivables Sale Agreement.
(d) The failure of the Custodian to identify any deficiency shall not relieve the Servicer, QPF, or any other party of any obligation with respect to the completeness or accuracy of the Receivable Files.
ARTICLE III — DUTIES OF THE CUSTODIAN
Section 3.01 — Safekeeping
(a) The Custodian shall hold and safeguard all Receivable Files delivered to it pursuant to this Agreement with the same degree of care as it exercises with respect to similar documents maintained for its own account or for its other institutional custodial clients, and in no event less than reasonable care, in compliance with all applicable laws, rules, and regulations.
(b) Physical Receivable Files shall be maintained in fireproof, secure storage facilities at the Custodian's Corporate Trust Office or at such other location as may have been approved in writing by the Owner and the Trustee in accordance with Section 2.01(b). Such storage facilities shall be equipped with appropriate fire suppression systems, intrusion detection and prevention systems, and environmental controls designed to protect documents from damage or deterioration.
(c) Electronic Receivable Files shall be maintained on secure servers with appropriate access controls, encryption (utilizing industry-standard encryption protocols), and disaster recovery procedures. The Custodian shall maintain backup copies of all electronic Receivable Files at a geographically separate disaster recovery facility. The Custodian's data security and disaster recovery procedures shall be consistent with its standard practices for institutional custodial clients and shall comply with all applicable laws, regulations, and regulatory guidance, including, without limitation, those issued by the Office of the Comptroller of the Currency.
(d) The Custodian shall maintain appropriate insurance coverage for loss of or damage to the Receivable Files in its possession, at levels consistent with industry practice for custodians of similar documents.
Section 3.02 — Segregation
(a) All Receivable Files shall be segregated from the Custodian's own property and from the property of other clients of the Custodian. Physical Receivable Files shall be stored in separate, designated storage areas or containers clearly labeled to indicate that they are the property of the Owner and are held subject to the terms of this Agreement.
(b) All Receivable Files, whether held in physical or electronic form, shall be clearly identified as the property of Quorum Receivables Funding 2022-1 LLC held pursuant to this Agreement and subject to the lien of the Trustee under the Indenture and the Grant of Security Interest. The Custodian shall maintain records and labeling systems sufficient to identify the Receivable Files as property of the Owner at all times.
(c) The Custodian shall not commingle the Receivable Files with any other documents, files, or records except as may be necessary for reasonable administrative purposes, and then only to the extent that the Receivable Files remain separately identifiable at all times.
Section 3.03 — Record Maintenance
(a) The Custodian shall maintain a complete and accurate schedule or inventory (the "Custodian Inventory") of all Receivable Files in its possession. The Custodian Inventory shall be updated on an ongoing basis as Receivable Files are added during the Revolving Period, as Receivable Files are released upon Receivable payoff, liquidation, or for servicing purposes, and as documents are returned following temporary release.
(b) The Custodian Inventory shall include, at a minimum, the following information with respect to each Receivable File: (i) the loan number of the related Receivable, (ii) the Obligor name, (iii) the outstanding principal balance of the related Receivable (as reflected on the most recent Receivables Schedule delivered by the Servicer), (iv) the date on which the Receivable File was received by the Custodian, (v) the location at which the Receivable File is stored (if physical), and (vi) the status of the Receivable File (e.g., in custody, released for servicing, released upon payoff).
(c) The Custodian Inventory shall be maintained in electronic form and shall be available for inspection by the Owner, the Servicer, the Trustee, the Back-Up Servicer (Northvane Bank, N.A.), the Rating Agencies (Brindoval Ratings Inc. and Pinnacle Rating Services LLC), the independent auditors (Meridian Ledger LLP), and the verification agent (Veristead Analytics LLC) upon reasonable prior written notice during normal business hours at the Custodian's Corporate Trust Office.
(d) The Custodian shall provide the Owner, the Servicer, and the Trustee with a summary report of the Custodian Inventory on a monthly basis, no later than ten (10) Business Days following the end of each Collection Period, setting forth the total number of Receivable Files in its possession, the number of Receivable Files added during such Collection Period, the number of Receivable Files released during such Collection Period, and the total number of outstanding Deficiency Notices.
Section 3.04 — Review and Certification
(a) Initial Review. Within sixty (60) days following the Closing Date, the Custodian shall complete an initial review of the Receivable Files delivered to it in connection with the initial pool and shall deliver to the Owner and the Trustee a Custodian Certification in substantially the form attached hereto as Exhibit A. Such Custodian Certification shall certify:
(i) The total number of Receivable Files received and reviewed by the Custodian;
(ii) Any exceptions or deficiencies noted during the Custodian's review, identified by loan number and Obligor name, together with a description of the nature of each exception or deficiency;
(iii) That the Receivable Files reviewed by the Custodian appear, on their face, to relate to the Receivables listed on the Receivables Schedule delivered by the Servicer in connection with the initial pool; and
(iv) The date on which the review was completed.
(b) Periodic Reviews. The Custodian shall perform periodic reviews of the Receivable Files in its possession no less frequently than annually during the term of the Indenture. Each periodic review shall cover a statistically significant sample of the Receivable Files (as determined by the Custodian, but in no event fewer than five percent (5%) of the then-outstanding Receivable Files) and shall be designed to confirm the continued completeness and integrity of the Receivable Files in the Custodian's possession. Upon completion of each periodic review, the Custodian shall deliver a Custodian Certification to the Owner and the Trustee certifying the results of such review.
(c) Reviews of Additions. With respect to Receivable Files delivered during the Revolving Period, the Custodian shall review such Receivable Files within thirty (30) days of receipt and shall include the results of such review in the next Custodian Certification delivered to the Owner and the Trustee.
(d) Exception Reports. Upon discovery of any exception or deficiency during any review (whether initial, periodic, or in connection with additions during the Revolving Period), the Custodian shall deliver an exception report promptly to the Owner, the Servicer, and the Trustee, setting forth the details of such exception or deficiency. Any exception or deficiency shall also be reported in the Custodian's Deficiency Notice process set forth in Section 2.05.
(e) Scope of Review. The Custodian's review of the Receivable Files shall be limited to a review of the documents on their face. The Custodian shall have no duty or obligation to verify the accuracy or authenticity of any document, to determine whether any Receivable satisfies the Eligible Receivable criteria, or to investigate any matter beyond the face of the documents reviewed.
Section 3.05 — Release of Receivable Files
(a) The Custodian shall release Receivable Files from its possession only under the following circumstances:
(i) Release for Servicing Purposes. Upon written request of the Servicer (or the Back-Up Servicer or any successor servicer), for purposes of servicing, including, without limitation, collection efforts, modification, restructuring, or enforcement of the related Receivable, provided that the Servicer (or such other requesting party) executes and delivers to the Custodian a Trust Receipt in substantially the form attached hereto as Exhibit B with respect to each Receivable File so released. The Trust Receipt shall identify each Receivable by loan number, Obligor name, and outstanding principal balance and shall include the Servicer's covenant to return the released Receivable File within the time period specified in paragraph (b) below.
(ii) Release Upon Direction of the Trustee. Upon written direction of the Trustee, in connection with the enforcement of remedies following an Event of Default under the Indenture. The Custodian shall release such Receivable Files as the Trustee may direct, and the Trustee's written direction shall constitute sufficient authority for the Custodian to effect such release.
(iii) Release Upon Payoff or Liquidation. Upon satisfaction, payoff, or liquidation of the related Receivable, as confirmed in writing by the Servicer, the Custodian shall release the related Receivable File to the Servicer and shall update the Custodian Inventory accordingly to reflect such release.
(iv) Release Upon Termination. Upon termination of this Agreement in accordance with Article IX hereof, the Custodian shall release all remaining Receivable Files to the Owner or as otherwise directed by the Trustee.
(b) Return of Released Receivable Files. Any Receivable File released to the Servicer for servicing purposes pursuant to clause (a)(i) above shall be returned to the Custodian within thirty (30) days of the date of release, or within such longer period as may be agreed in writing by the Custodian, the Owner, and the Trustee. If any Receivable File is not returned within such period, the Custodian shall notify the Owner and the Trustee in writing of such failure.
(c) Tracking of Released Files. The Custodian shall maintain a log of all Receivable Files released from its possession, including the date of release, the identity of the requesting party, the reason for release, and the expected return date (if applicable). Such log shall be included in the Custodian Inventory and shall be available for inspection in accordance with Section 3.03(c).
Section 3.06 — Access and Audit Rights
The Owner, the Trustee, the Servicer, the Back-Up Servicer (Northvane Bank, N.A.), the Rating Agencies (Brindoval Ratings Inc. and Pinnacle Rating Services LLC), the independent auditors of the Owner and QPF (Meridian Ledger LLP), and the verification agent (Veristead Analytics LLC) shall each have the right, upon reasonable prior written notice to the Custodian (not less than five (5) Business Days), to inspect, audit, examine, or copy the Receivable Files at the Custodian's Corporate Trust Office during normal business hours. All costs and expenses incurred in connection with any such inspection, audit, examination, or copying shall be borne by the requesting party, except that the Custodian shall provide reasonable cooperation and assistance at no additional charge. The Custodian shall designate appropriate personnel to facilitate any such inspection or audit. Any party exercising its access rights under this Section 3.06 shall comply with the Custodian's reasonable security and confidentiality procedures.
Section 3.07 — Cooperation with Back-Up Servicer and Successor Servicer
(a) In the event of a servicer default, a servicer termination event, or any other event that results in the appointment of a successor servicer under the Servicing Agreement, the Custodian shall cooperate fully and in a timely manner with Northvane Bank, N.A. (in its capacity as Back-Up Servicer) or any other successor servicer in transitioning access to and, if directed by the Trustee, custody of the Receivable Files.
(b) The Custodian shall provide the Back-Up Servicer or any successor servicer with full access to all Receivable Files (whether physical or electronic) within five (5) Business Days of receipt of written instruction from the Trustee directing such access. Such access may include (i) physical access to the Custodian's storage facilities, (ii) electronic access to the Custodian's systems on which electronic Receivable Files are maintained, and (iii) delivery of copies (physical or electronic) of any or all Receivable Files.
(c) The Custodian shall cooperate with the Back-Up Servicer or successor servicer in the transfer of physical custody of the Receivable Files to such party, if so directed by the Trustee, including by delivering the Receivable Files to such party at a location designated by the Trustee.
(d) The reasonable costs and expenses incurred by the Custodian in connection with its cooperation under this Section 3.07 shall be reimbursable as expenses of the Custodian in accordance with Section 6.02 hereof.
Section 3.08 — No Duty to Investigate or Verify
(a) The Custodian has no duty or obligation to investigate, verify, or determine the accuracy, genuineness, completeness, or validity of any document constituting a Receivable File, or to determine whether any Receivable satisfies the Eligible Receivable criteria or any other criteria set forth in the Related Documents. The Custodian's duties under this Agreement are limited to the safekeeping, recordkeeping, review, certification, and release functions expressly set forth herein.
(b) The Custodian shall not be responsible for, and shall have no liability in respect of, the acts or omissions of the Servicer, the Originator (QPF), QRH, the Owner, the Trustee (in its capacity as indenture trustee), the Back-Up Servicer, or any other person or entity, including, without limitation, any failure by any such party to deliver complete or accurate Receivable Files, any failure to originate or service any Receivable in accordance with applicable law or the Related Documents, or any fraud, misrepresentation, or error by any such party.
(c) In performing its duties under this Agreement, the Custodian shall be entitled to assume, absent actual knowledge or receipt of written notice to the contrary, that all documents delivered to it are genuine, complete, and accurate, and that all signatures on such documents are authentic.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES
Section 4.01 — Representations and Warranties of the Owner
The Owner hereby represents and warrants to the Custodian as of the date hereof and as of the Closing Date as follows:
(a) Organization and Existence. The Owner is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware (Delaware Secretary of State File No. 7894231). The sole member of the Owner is Quorum Receivables Holding LLC. The independent manager of the Owner is Timothy R. Callan, provided by Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. The Owner is qualified to do business and is in good standing in each jurisdiction where the nature of its business or the ownership of its assets requires such qualification.
(b) Power and Authority. The Owner has full limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.
(c) Due Authorization. The execution, delivery, and performance of this Agreement by the Owner have been duly authorized by all necessary limited liability company action on the part of the Owner, including all necessary approvals of its sole member and its independent manager.
(d) Enforceability. This Agreement constitutes the legal, valid, and binding obligation of the Owner, enforceable against the Owner in accordance with its terms, except as enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, or similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(e) No Conflict. The execution, delivery, and performance of this Agreement by the Owner do not and will not (i) violate or conflict with the certificate of formation or limited liability company agreement of the Owner, (ii) violate or conflict with any law, rule, regulation, order, judgment, or decree applicable to the Owner, (iii) result in a breach of or default under any agreement, instrument, or obligation to which the Owner is a party or by which it or its assets are bound, or (iv) result in the creation or imposition of any lien, charge, or encumbrance upon the assets of the Owner other than those created pursuant to the Indenture, the Grant of Security Interest, and the Related Documents.
(f) Eligible Receivables. The Receivable Files delivered or to be delivered to the Custodian relate to Receivables that, as of their respective dates of transfer to the Owner, satisfied the Eligible Receivable criteria set forth in the Receivables Sale Agreement. The Owner makes no representation or warranty as to the continued satisfaction of such criteria following the date of transfer.
Section 4.02 — Representations and Warranties of the Custodian
The Custodian hereby represents and warrants to the Owner as of the date hereof and as of the Closing Date as follows:
(a) Organization and Existence. Calvoneth Trust Company, National Association is a national banking association duly organized and validly existing under the laws of the United States of America, with its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, Texas 77002. The Custodian is duly authorized to exercise corporate trust and custodial powers under the laws of the United States.
(b) Power and Authority. The Custodian has full corporate power and authority to execute and deliver this Agreement, to act as Custodian of the Receivable Files, and to perform its obligations hereunder.
(c) Due Authorization; No Conflict. The execution, delivery, and performance of this Agreement by the Custodian have been duly authorized by all necessary corporate action on the part of the Custodian. The execution, delivery, and performance of this Agreement do not and will not violate or conflict with the Custodian's articles of association, bylaws, or other organizational documents, or any law, rule, regulation, order, judgment, or decree applicable to the Custodian, or result in a breach of or default under any agreement, instrument, or obligation to which the Custodian is a party or by which it is bound.
(d) Enforceability. This Agreement constitutes the legal, valid, and binding obligation of the Custodian, enforceable against the Custodian in accordance with its terms, except as enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, or similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(e) Adequate Facilities and Personnel. The Custodian has adequate facilities, systems, and personnel to fulfill its duties as Custodian under this Agreement, including, without limitation, secure physical storage facilities, electronic systems with appropriate data security and disaster recovery capabilities, and qualified personnel experienced in the custody and administration of receivable files and related documents.
(f) No Pending or Threatened Action. The Custodian is not subject to any pending or, to its knowledge, threatened action, suit, proceeding, investigation, or claim by any governmental authority or other person that would materially adversely affect the Custodian's ability to perform its obligations under this Agreement or to act as custodian of the Receivable Files.
ARTICLE V — CUSTODIAN'S STANDARD OF CARE; LIABILITY
Section 5.01 — Standard of Care
The Custodian shall exercise the same degree of care in the safekeeping, handling, and administration of the Receivable Files as it exercises with respect to similar documents maintained for its own account or for its other institutional custodial clients, but in no event less than the degree of care that a reasonably prudent national banking association acting in a custodial capacity would exercise under the circumstances. The Custodian shall comply with all applicable laws, rules, regulations, and regulatory guidance in the performance of its duties hereunder.
Section 5.02 — Limitation of Liability
(a) The Custodian shall not be liable for any losses, claims, damages, liabilities, costs, or expenses of any kind or nature whatsoever except to the extent that such losses, claims, damages, liabilities, costs, or expenses are directly caused by the Custodian's own negligence, willful misconduct, bad faith, or material breach of its obligations under this Agreement.
(b) In no event shall the Custodian be liable for any indirect, consequential, special, incidental, or punitive damages of any kind, including, without limitation, lost profits, loss of business opportunity, diminution in value, or any other speculative or remote damages, regardless of whether the Custodian has been advised of the possibility of such damages and regardless of the form of action.
(c) The Custodian shall not be liable for any loss or damage to the Receivable Files caused by fire, flood, earthquake, hurricane, tornado, war, insurrection, terrorism, civil unrest, power failure, telecommunications failure, epidemic or pandemic, or any other event constituting force majeure or any other cause beyond the Custodian's reasonable control, provided that the Custodian has taken reasonable precautions consistent with its obligations under Section 3.01 to protect the Receivable Files from such events.
(d) The aggregate liability of the Custodian under this Agreement shall not exceed the aggregate amount of Custodian Fees received by the Custodian during the twelve (12) month period immediately preceding the event giving rise to such liability, except in cases of the Custodian's willful misconduct or fraud, in which case no limitation on liability shall apply.
Section 5.03 — Reliance
(a) The Custodian may conclusively rely, and shall be fully protected in acting or refraining from acting, upon any written notice, instruction, certificate, request, direction, consent, resolution, opinion, report, document, or other instrument that the Custodian in good faith reasonably believes to be genuine and to have been signed, executed, or delivered by the proper person or authority.
(b) The Custodian may consult with and rely on the advice of its legal counsel, Ashfield & Greer LLP, One Chase Manhattan Plaza, New York, New York 10005 (Attention: Vivian Sato, lead partner), or such other counsel as the Custodian may retain from time to time, and shall not be liable for any action taken, suffered, or omitted by it in good faith in reliance upon the advice or opinion of such counsel.